（Expressed in RMB thousands）
F．INANCLAL STATEMENTS ITEMS
20×8
20×7
Sales
64000
48000
C．ost of sales
54000
42000
Net profit
30
-20
D．ecember 31, 20×8
D．ecember 31, 20×7
Inventory
16000
12000
C．urrent assets
60000
50000
Total assets
100000
90000
C．urrent liabilities
20000
18000
Total liabilities
30000
25000
D．uring the audit, John has the following findings:(1)On December 31, 20×8,Company A discounted an undue commercial acceptance bill (with recourse) amounted to RMB 6000000, and was charged discounting interest of RMB 180000 by the bank. Company A made an accounting entry on December 31, 20×8 as follows:
D．r. Cash in Bank RMB 5820000
D．r. Financial Expenses RMB 180000
C．r. Notes Receivable RMB 6000000(2)In June 20×8, Company A provided guarantee for Company B’s borrowings from Bank C. In December 20×8, since Company B failed to repay the borrowings in time, Company A was sued by Bank C to make relevant repayment amounted to RMB 3000000. As at December 31, 20×8, the lawsuit was still pending, and, based on the reasonable estimate of the guarantee losses made by the management, Company A made an accounting entry as follows:
D．r. Non-operating Expenses RMB 3000000
C．r. Provisions RMB 3000000
On January 10, 20×9,Company A received a judgment on repaying RMB 2500000
to Bank C to settle the guarantee obligation. Company A made the payment and an accounting entry at the end of January 2009 as follows:
D．r. Provisions RMB 3000000
C．r. Cash in Bank RMB 2500000
C．r. Non-operating Income RMB 500000
Required:(1)For Revenue and Net Profit, explain which one is more appropriate to be used to calculate planning materiality for Company A’s 20×8 financial statements as a whole. Explain the reasons of that conclusion.(2)Based on the un-audited in formation of selected financial statements items, for the purpose of using analytical procedures as risk assessment procedures, calculate the following ratios:(a)Inventory Turnover Rate in 20×8;(b)Gross Profit Ratio in 20×8;(c)After Tax Return on Total Assets in 20×8; and(d)Current Ratio as at December 31, 20×8(3)For each audit finding identified during the audit, list the suggested adjusting entries that John should made for Company A’s 20×8 financial statements. Tax effects, if any, are ignored.